Not Many Are Piling Into RumbleON, Inc. (NASDAQ:RMBL) Stock Yet As It Plummets 25%

To the annoyance of some shareholders, RumbleON, Inc. (NASDAQ:RMBL) shares are down a considerable 25% in the last month, which continues a horrid run for the company. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 39% share price drop.

In spite of the heavy fall in price, you could still be forgiven for feeling indifferent about RumbleON's P/S ratio of 0.1x, since the median price-to-sales (or "P/S") ratio for the Specialty Retail industry in the United States is also close to 0.4x. Although, it's not wise to simply ignore the P/S without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

View our latest analysis for RumbleON

How RumbleON Has Been Performing

RumbleON could be doing better as its revenue has been going backwards lately while most other companies have been seeing positive revenue growth. Perhaps the market is expecting its poor revenue performance to improve, keeping the P/S from dropping. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on RumbleON.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like RumbleON's to be considered reasonable.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 24%. However, a few very strong years before that means that it was still able to grow revenue by an impressive 228% in total over the last three years. Although it's been a bumpy ride, it's still fair to say the revenue growth recently has been more than adequate for the company.

Turning to the outlook, the next three years should generate growth of 14% per year as estimated by the five analysts watching the company. That's shaping up to be materially higher than the 5.9% per year growth forecast for the broader industry.

With this in consideration, we find it intriguing that RumbleON's P/S is closely matching its industry peers. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

Following RumbleON's share price tumble, its P/S is just clinging on to the industry median P/S. While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

Despite enticing revenue growth figures that outpace the industry, RumbleON's P/S isn't quite what we'd expect. There could be some risks that the market is pricing in, which is preventing the P/S ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future revenue could see some volatility.

We don't want to rain on the parade too much, but we did also find 3 warning signs for RumbleON (1 is potentially serious!) that you need to be mindful of.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.